Behind Adelaide’s moderate growth is a solid market set to reward investors

After the heady boom in Sydney and Melbourne during the past couple of years, anything less would be considered boring, even disappointing.

But now that the biggest markets are in a decline, experts say the boring markets like Adelaide could be your key to getting the best return in the current cycle.

While the latest CoreLogic RP Data stats show a subtle drop in dwelling values during the past 12 months, Adelaide has a number of positives working in its favour.

According to Andrew Wilson, senior economist at Domain, Adelaide’s moderate yet steady market is very much underrated by investors.

“Adelaide actually has had a remarkable year,” says Wilson. “It’s a very solid market, particularly the upper end, which keeps producing moderate but reliable returns for investors. It’s a steady market and I think this year is going to be another notable year for Adelaide. While you don’t get the peaks and troughs, the market just keeps on keeping on. It provides certainty for investors.”

Besides being the most affordable mainland capital city in Australia,Adelaide also has a shortage of rental property, which means healthier rental returns.

“You can still buy properties there for under $200k in the northern suburbs ofAdelaide. For this, you’re getting over 7% yields. Adelaide’s vacancy rate is among the lowest in the country.”

Upper-end properties in demand
Upgraders also appear to be taking advantage of the low interest rate to trade up, as shown by the strong performance of prime suburbs like Joslin, Unley Park and Glen Osmond. Despite price tags of over a million dollars, buyers are snapping up properties in these areas and pushing the median price up by around 30%.

However, Robert Mellor, managing director at BIS Shrapnel, warns investors to be cautious and selective if they plan to invest in Adelaide.

“The economy is stagnant. The population only grew by 0.8%, and this is not going to change in the next two years. It’s an affordable market, but it doesn’t have anything to attract people in. It’s not a place where jobs are being created.”

Biggest gainers and losers
Over the September quarter, the proportion of loss-making resales was just under 9.5%, according to CoreLogic RP Data’s Pain and Gain report. This is slightly higher than the 9.45% recorded at the end of the first quarter 2015.

The suburb of Prospect recorded no loss-making resales over the quarter. Campbelltown and Unley recorded less than 3% of all resales at a loss.

The council areas with the highest level of loss-making resales over the quarter were Playford, where one in four sales were at a loss, and Light and Walkerville, which both recorded 14.3% loss-making sales.

SUBURB TO WATCHWayville, SA: Desirable suburb continues to impress

Surrounded by parks on its northern boundary, Wayville is a green and leafy suburb just 2km from the Adelaide CBD. The streets are wide, tidy and in immaculate condition, with Adelaide’s best restaurants, showgrounds and schools nearby.

With a median house price of $872,500 – twice as expensive as the Adelaide metro median – Wayville’s detached housing market remains one of the city’s more exclusive areas.

Since December 2012, median house values surged by a total of 21.2%, according to OnTheHouse.com.au.

Units are more affordable at a median price of under $400k, and are in high demand. OnTheHouse.com.au recorded a massive 11% growth during the past 12 months.

Over the last 10 years, annual growth in unit prices has averaged 5.3%, indicating a market in a transition upwards.

OnTheHouse.com.au predicts Wayville houses will grow by an average of 3% each year over the next eight years. “In some years this rate of growth will be exceeded, while in other years it will fail to materialise.

Based on the expected rate of growth over the next eight years, the median value of houses in suburb Wayville will be in the order of $1,152,500,” it says.

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